Question

Variables typically included in a multivariate demand function (other than the price and quantity of the item the demand function represents) are consumer tastes and preferences, the number of buyers, spendable (disposable) income, prices of substitute goods, prices of complementary goods, advertising expenditures, weather, and expectations. Recalling that the price of the item being considered is placed on the vertical axis, and the quantity on the horizontal axis, the other variables are termed demand shifters. Please answer the following questions about the affect changes in other variables might have on the demand for the item. These changes will either cause demand to increase (shift right) or decrease (shift left). Use either word as applicable, for the short answer.

1. Small fire extinguishers can be refilled, must be serviced and inspected annually, and must be pressure tested every five years. Additionally, there is a safety regulation that arbitrarily declares them obsolete after 25 years (after which the code prohibits their commercial use, repair, or recertification). Commercial businesses are required by fire codes to have certified extinguishers that meet the code regardless of the extinguisher’s operability.   The effect of this regulation is to ________________ the demand for new extinguishers, rather than recertifying older ones.

2. Retail businesses (such as Best buy, Barnes and Noble and other brick and mortar retailers) continually encourage their trade associations to lobby Congress to impose sales taxes on internet sales. They want internet sales taxed as a way of __________________ the demand for the merchandise physically stocked in their stores.

3. Compressed Natural Gas (CNG) powers vehicles well, and is an almost pollution-free fuel. If factory equipped, vehicles can switch between using either CNG or ordinary gasoline. It costs under $4000 extra to buy such a factory-equipped auto. However, the auto industry makes little effort to promote the use of CNG. Instead, the auto industry is rushing to introduce battery-powered autos that use expensive, heavy and dangerous Lithium Ion batteries. Suppose the government sufficiently subsidized the installation of CNG pumps at public service stations. The effect might _________________ the demand for CNG powered autos.

4. Government-promulgated rules and regulations specify ever stricter building codes and safety standards, more encompassing caloric maximums for fast foods, higher automobile gas mileage minimums, tighter pollution emission standards, etc, etc. Free market advocates vociferously and vocally condemn these as unnecessary market interferences that increase the production cost of domestically produced goods. Yet the same advocates are among the strongest enforcers of these standards and regulations because they sell and install the new items the codes require. This contradiction is readily explained by realizing that increasing regulations and standards actually ______________ the demand for code-mandated items they sell/manufacture relative to imports.

5. Fast food chains have responded to government mandates by publishing caloric values of the foods they sell and by offering healthy menu alternatives in addition to their traditional high fat, high calorie offerings. Nevertheless, the fast-food chains’ public promotion and advertising continues to stress the supersizing and/or high calorie, high fat food items they are famous for (think supersized French fries and drinks:-)). They are really trying to _____________ the demand for the high dollar supersized choices by not promoting the healthy alternatives.

Variables typically included in a multivariate supply function (other than the price and quantity of the item the supply function represents) are prices of other goods that use similar input resources for production, expectations, the number of suppliers, techniques of production, taxes and subsidies, prices of input resources, and weather. Please answer the following questions about the affect changes in other variables might have on the supply of the item. These changes will either cause supply to increase (shift right) or decrease (shift left). Use either word as applicable, for the short answer.

       1. Regents of Oklahoma colleges and universities are allowing schools to develop an increasing number of certificate programs. These are two-year programs consisting of just the advanced specialized courses in a field. Upon completion, the student receives a certificate of completion rather than the traditional degree. They hope this leads to an _________________ supply of narrowly-trained specialists needed to meet shortages in specialized skills..

      2. Tablet computers have proliferated. In the five years after the Apple iPad™ was introduced, most technology companies have introduced their own cheaper versions. These same companies are also _________________ the supply of desktop computers they produce.

      3. New York, with encouragement from its Mayor, has passed a city ordinance limiting the maximum size of sugared, high calorie drinks that can be sold within their city limits. This is an attempt to _______________ the supply of these obesity-causing beverages.

      4. In July, 2013, the world price of oil began spiking above $100 per barrel. Egyptians were rioting and calling for the resignation of their president (which the military did indeed achieve). This turmoil likely triggered expectations of a future _______________ in the supply of petroleum from mid-eastern countries.

      5. Obesity is now a medically certified disease (which may mean insurance claims for medical treatment of it might be paid). If so, medical schools’ supply of doctors specializing in obesity treatment will likely ___________ .

Answer 1

For Demand Side

1. It increase the demand for new extinguisher's rather than rectify the old ones.

2. By taxed the internet sales to decrease the demand for merchandise physically stocked in the store.

3. By government subsidy for the installation of CNG pumps at public service stations. This effect might Increase the demand for CNG powered autos.

4.  By realizing that increasing regulations and standards actually Decrease the demand for code-mandated items they sell/manufacture relative to imports.

5. the fast-food chains’ public promotion and advertising  trying to Increase the demand for the high dollar supersized choices by not promoting the healthy alternatives.

For SupplySide

   1. Regents of Oklahoma colleges and universities are allowing schools to develop an increasing number of certificate programs. These are two-year programs consisting of just the advanced specialized courses in a field. Upon completion, the student receives a certificate of completion rather than the traditional degree. They hope this leads to an Increase supply of narrowly-trained specialists needed to meet shortages in specialized skills.

   2. Tablet computers have proliferated. In the five years after the Apple iPad™ was introduced, most technology companies have introduced their own cheaper versions. These same companies are also Decrease the supply of desktop computers they produce.

3. New York, with encouragement from its Mayor, has passed a city ordinance limiting the maximum size of sugared, high calorie drinks that can be sold within their city limits. This is an attempt to Decrease the supply of these obesity-causing beverages.

4. In July, 2013, the world price of oil began spiking above $100 per barrel. Egyptians were rioting and calling for the resignation of their president (which the military did indeed achieve). This turmoil likely triggered expectations of a future Decrease in the supply of petroleum from mid-eastern countries.

5. Obesity is now a medically certified disease (which may mean insurance claims for medical treatment of it might be paid). If so, medical schools’ supply of doctors specializing in obesity treatment will likely Increase .